LyondellBasell Revenue Tops Views; Adjusted Earnings Misses Consensus

Global chemical company and oil refiner LyondellBasell Industries NV (NYSE: LYB – $98.11) reported third quarter earnings of $2.67 per share, up from $2.31 a year ago. The result included a $0.26 gain from the sale of the company’s interest in the Geosel pipeline and storage system in France, without which, earnings would have been $2.41, seven cents below the average estimate. Revenue was $8.52 billion, versus $7.37 billion last year and beat the $8.09 billion estimate. The Netherlands-based company with offices in London and Houston, said Hurricane Harvey reduced inventories across the petrochemical industry and contributed to further delays in the startup of new US ethylene and derivative capacity. As the industry works to rebuild inventories during the fourth quarter, LYB expects global markets will remain tight to “balanced” for the rest of the year and the industry will be better positioned to absorb capacity additions during 2018.

The stock, down 3% on the earning’s miss, has above-average capital gains potential over the next three to five years, in my opinion. And the company may make some minor bolt-on acquisitions to expedite growth even further. Also, the above-average dividend yield of 3.56% should remain intact, thanks to the company’s generous cash flow. Even with projected lower-than-expected full-year earnings of $9.95 per share, the valuation is reasonable and positions in LYB, although not without risk, can be maintained in a well-diversified income portfolio.